Vodacom mulls selling DRC stake

Johannesburg - Over the next six months Vodacom [JSE:VOD] will decide whether it will continue its operations in thee Democratic Republic of Congo (DRC), says chief executive Pieter Uys.

The group has to deal with a number of challenges in the country. These include a serious financing dispute with its co-shareholder, a struggling economy, a strict and uncertain regulatory environment and an “unpredictable” tax system.

In an interview with Sake24 on Monday Uys said a decision to sell had not been taken yet but if the operations failed to add value it would be difficult to inject the required investment into such a capricious environment.

Vodacom has to face “intense competition” in the DRC, but because of a dispute with its co-shareholder, Congolese Wireless Network (CWN), it is currently impossible to make any investment.

If Vodacom wants to survive it has to continue investing, says Uys.

The dispute, which has been referred to the international Brussels Commercial Court for arbitration, arises from CWN’s claim that Vodacom cannot charge interest on loans that have been advanced to Vodacom Congo.

CWN wants the loans to be converted into share capital, but it is not prepared to dilute its 49% interest or even put capital into the business.

An unexpected $30m tax liability for some type of sales tax rubs further salt in the wound. Uys says although the company has lodged an appeal against the tax, the taxation system is unpredictable and success is not guaranteed.

The DRC economy, which depends largely on mining, has not recovered appreciably since the start of the global economic crisis; its currency has for instance almost halved in value.

Uys says that Vodacom believes in the DRC, and would like to resolve the issues. The opportunities are there, and cellphone usage is low.

In the past year turnover from its operations in the DRC has declined by 28.3% to $23m, while average monthly turnover per consumer in rand terms has fallen 41.3% to R37.

- Sake24.com

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